PODCAST EPISODE 168: [Reduction in Force] Part 14: Are Cash Payments (VSIPs) Being Offered?

ProFeds Founder, Chris Kowalik, reviews the possibility of cash payments being offered to federal employees as part of the RIF (reduction in force) plan.  

Key takeaways:

• Rules of the Voluntary Separation Incentive Payment (VSIP)
• How much are the incentives (and proposals for the amount to change)
• How VSIPs work with other downsizing tools (like VERAs)
• Who is not allowed to receive a VSIP buyout

To Watch on YouTube, CLICK HERE

Additional Resources:

• Link to full RIF training series: FedImpact.com/RIF-training-series 
• OPM’s guide to VSIPs: https://www.opm.gov/policy-data-oversight/workforce-restructuring/voluntary-separation-incentive-payments/guide.pdf
• Local workshop locations and dates: FedImpact.com/attend 
• To be introduced to a local financial professional: FedImpact.com/request-to-meet

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Transcript of this episode coming soon:

Originally released on 3/7/2025

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Over the past couple of months, there’s been a lot of talk of the early out, but not a lot of talk of the voluntary separation incentive payment or the VSIP. This is the cash incentive to be able to leave. And so we’re starting to get a number of questions from federal employees wondering if that’s part of what’s coming next in the RIF process.

If you’ve heard about VSIP and you’re wondering, is this going to be something my agency is going to be providing? Although I might not have the answer to that particular question, I can tell you how the VSIP works so that you know once you receive that news from your agency.

Hi, I’m Chris Kowalik, the founder of ProFeds. Welcome to the Fed Impact Podcast where we offer candid insights on your federal retirement. This video series is helping feds to be able to pick and choose the videos that apply to them. I hope that you’ll poke around and see exactly what it is that you need to know with respect to the reduction in force.

Reduction in Force – Are Cash Payments (VSIPs) Being Offered?

Let’s talk about the VSIP. So the VSIP or the cash incentive buyout is a tool that the government has in its arsenal when they’re looking to downsize the government.

This is a voluntary choice that federal employees are given. It is something that has to be extended from the agency. An employee can’t just decide to do this. This is something that has to be offered to them. And oftentimes the VSIP, this cash payment is offered in conjunction with an early out, and both can happen at the same time.

A single person can take both of those offers, so they get the early out and they get the cash to incentivize them to leave. But in other cases, the VSIP and the VRO will be offered independently of one another.

Eligibility

The VSIP is certainly a great tool and one that we want to just bring you up to speed on on how it works. To be eligible for the VSIP in good government fashion, there’s a whole long list of eligibility and people who are specifically not eligible. But let me tell you the top two. If you are under an appointment without a time limit and you had at least three years in the executive branch, you’ll likely qualified for a VSIP. If your agency has the authority to offer it and chooses to do so to you.

If you are curious about all the other details with respect to eligibility for a VSIP, you can see the link right in the show notes where we go right to the horse’s mouth with respect to OPM to show you that eligibility. We’ll give you some instructions on how to get to the show notes here shortly.

How Much Is the Cash Buyout?

With the VSIP, like I mentioned, this is a cash buyout. Most agencies have a $25,000 limit to the VSIP. Some agencies, specifically the DOD, has a $40,000 limit. Very important that we understand what those limits are. And remember, you had to have had three years of service or more to be able to qualify for the VSIP.

Remember, this is a voluntary choice that you are making. That’s what the V in VSIP stands for. This will be a lump sum payment and it is going to be taxed. I don’t want you to be surprised when you get your money and you realize that federal income tax, your state income tax, if you happen to be in a state that has that.

I do also want to remind you, if you get the VSIP, if you take that voluntary cash incentive, you will not have access to severance pay. Those are two very different sides of the house, voluntary VSIP, involuntary severance. Those are two different sides of the house, and you will not be able to draw both benefits together.

Hopefully that’s helpful on the VSIP. Who knows whether your agency’s going to offer that or not, but at least when you hear that news, you know exactly what it means and what to look out for.

Get Connected & Next Steps

Hopefully this has been helpful to you. If so, give us a subscribe here in the podcast section, wherever you might be listening to podcasts. And to be connected to us on a more regular basis, you can pull out your phone and text the word podcast to (224) 444-6144. We’ll get connected and you’ll have access to all the tools and resources that we have available for federal employees.

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